Whenever the Controller determines that moneys in the General Fund are, or are expected to be, insufficient for the payment of all appropriations by the Legislature which are required to be paid in the then current fiscal year out of the General Fund, the Controller, based upon his or her estimate of the probable income to the General Fund during the then current fiscal year and the probable dates of receipt thereof, may draw a demand or demands against appropriations made from the General Fund to be paid in the then current fiscal year prior to the receipt of the income, and deliver the demand or demands to the Treasurer. The Treasurer shall register the demand or demands for nonpayment and may issue notes by resolution pursuant to Section 17302.
Part 5STATE OF CALIFORNIA NOTES
Section § 17300
This law allows the Controller, who oversees state spending in California, to take special action if there's not enough money in the state's General Fund to cover all the bills (appropriations) approved by the Legislature for the year. The Controller can estimate the money expected to come in and the timing, and then request payments ahead of time, even if the funds haven't arrived yet. These payment requests are sent to the Treasurer, who can note them as pending and use them to issue short-term borrowing (notes) under another section.
General Fund insufficiency Controller's estimate demand for appropriations Treasurer's registration nonpayment registration probable income fiscal year appropriations Treasurer's notes short-term borrowing Section 17302 resolution payment demands Legislature appropriations budget shortfall solutions
Section § 17301
This law allows the Treasurer to sell notes, which are like financial IOUs, in a way that seems best, either through negotiation or by inviting others to bid for them. The money to pay back these notes and any interest they gather comes from the General Fund.
Notes authorized to be issued may be sold by the Treasurer from time to time on a negotiated or a competitive bid basis as the Treasurer shall deem advisable. The Treasurer shall pay the notes and the interest thereon from moneys in the General Fund.
Treasurer financial notes negotiated sale competitive bid General Fund interest payment note issuance public finance state treasury operations fundraising methods government securities note sales strategy fund management debt instruments public funds allocation
Section § 17302
This law section describes the rules for issuing notes to raise enough funds to cover financial demands registered by the Controller. These notes are temporary borrowing tools and must match the amount needed. They need authorization via a resolution approved by key state officials, including the Treasurer, Controller, and Director of Finance.
Notes can have several features: they can be negotiated, paid to a holder, come in various sizes, and must be paid within and not extended beyond 120 days post the fiscal year they were issued. Interest rates can vary, and they can be repaid early if allowed.
Alternatively, notes can be issued as commercial paper, which acts like short-term borrowing with similar rules to the notes, including maturity within 12 months. This commercial paper is flexible and can change or renew, staying within the amount of the Controller's demand and not surpassing the fiscal timeframe.
Notes shall be issued pursuant to this part only to raise funds in an amount sufficient to satisfy the Controller’s registered demand or demands. Proceeds of notes may also be used for the payments described in Section 17311 to the extent that those payments are not included within the appropriations comprising the demand or demands. The principal amount of the issuance of notes shall equal the amount of the demand or the portion of the demand that is satisfied by the issuance. The issuance of any notes pursuant to this part shall be authorized by a resolution adopted by the Treasurer with the approval of the Controller and the Director of Finance.
(a)CA Government Code § 17302(a) Any note (1) may be negotiable, (2) may be payable to order or to bearer, (3) may be in any denomination, (4) shall be payable not later than 120 days after the end of the fiscal year in which the note has been issued and shall not be renewable beyond that date, (5) may bear fixed or variable interest at a rate or rates to be determined as provided by the resolution and payable as provided therein, (6) may be payable on a fixed date or upon demand of the holder of the note, (7) may be made subject to prepayment or redemption at the option of the state or at the option of the holder, and (8) may have a term not exceeding 12 months.
(b)CA Government Code § 17302(b) In lieu of issuing notes pursuant to subdivision (a), the resolution may provide for the issuance of notes in the form of commercial paper. This commercial paper may be issued and renewed from time to time, in amounts, subject to the requirements of this subdivision, as the Treasurer shall determine, from the date of initial issuance until the final maturity date, which shall not be more than 12 months, and shall occur not more than 120 days after the end of the fiscal year in which the commercial paper was first issued, and shall not be renewed beyond that date. The maximum principal amount of commercial paper outstanding at any one time shall be stated in the resolution, and shall not be greater than the amount of the Controller’s demand. The resolution may also provide that the commercial paper (1) may be negotiable, (2) may be payable to order or to bearer, (3) may be in any denomination, (4) may bear fixed or variable interest at a rate or rates to be determined as provided in the resolution and payable as provided therein, (5) may be payable on a fixed date or upon demand of the holder of the commercial paper, (6) may be made subject to prepayment or redemption at the option of the state or of the holder, and (7) may contain any other provision necessary or appropriate to carry out the program of commercial paper.
notes issuance raising funds Controller's registered demand Proceeds of notes payment of demands Treasurer authorization negotiable notes interest rates prepayment option commercial paper fiscal year limit short-term borrowing state financing tools renewable commercial paper principal amount requirements
Section § 17303
When the state receives the money from selling certain financial notes, the Treasurer tells the Controller that the money is in the State Treasury and ready to pay specific financial obligations called registered demands. The Controller can then issue orders to pay these demands with money allocated by the Legislature. Once the notes are paid off, the demands related to those notes are officially canceled.
Upon receipt of the purchase price of the notes, the Treasurer shall notify the Controller that funds for the payment of all or part of the registered demand or demands are in the State Treasury and available for the payment of claims represented by the registered demand or demands. The Controller may thereupon proceed to draw warrants against appropriations lawfully made by the Legislature to be paid in the fiscal year and represented by the registered demand or demands. Upon the payment in full of the notes representing the registered demand or demands, or the portion of the demand or demands as set forth in Section 17302, the appropriate portion of the registered demand or demands shall be canceled.
Treasurer Controller registered demand purchase price of notes State Treasury warrants appropriations payment of claims fiscal year cancellation of demands financial obligations payment process legislative appropriations notes payment in full
Section § 17304
This law section states that money in the General Fund can be used to pay off notes (like loans or debts) and the interest on those notes. The notes and interest are exclusively repaid using the General Fund, but if the General Fund doesn't have enough money, the law allows borrowing internally from other funds to cover the payments.
Any revenues in the General Fund are available for the payment of all notes and the interest thereon until the notes and the interest thereon shall be fully paid and discharged. The notes, together with the interest thereon, shall be payable exclusively from moneys in the General Fund , but not excepting recourse to internal borrowing from other funds in the event insufficient moneys are available from the General Fund.
General Fund note repayment interest payment internal borrowing revenue allocation debt servicing financial management fund transfer budgetary provisions state obligations government finance fiscal policy cash flow management public funds loan repayment
Section § 17306
This law specifies that notes issued by the state under this part can be used as legal investments for various institutional funds. These include trust funds, insurer funds, savings and loan association funds, bank funds, and funds belonging to state and public agencies or corporations, such as cities and counties.
All notes issued pursuant to this part by the state are legal investments for any of the following:
(a)CA Government Code § 17306(a) Trust funds.
(b)CA Government Code § 17306(b) Funds of insurers.
(c)CA Government Code § 17306(c) Funds of savings and loan associations.
(d)CA Government Code § 17306(d) Funds of banks.
(e)CA Government Code § 17306(e) Funds of state agencies, cities, counties, cities and counties or other public agencies or corporations.
state-issued notes legal investments trust funds insurer funds savings and loan associations bank funds state agency funds public agency funds corporate funds investment eligibility municipal investment county investment public corporation funds city funds public investment options
Section § 17307
This law allows notes issued under this part to be used as security. They can be used to back up any public or private trust or obligation. Additionally, banks can use these notes as security for holding government funds.
Notes issued under this part are acceptable and may be used as security for the faithful performance of any public or private trust or obligation or for the performance of any act, including the use of notes by banks as security for deposits of funds of the state and its agencies, or of any city, county, city and county, or other public agency or corporation.
security for performance public trust obligation private trust obligation bank security deposits of funds state agency funds city funds county funds public agency corporate security faithful performance use of notes government deposits security notes trust security
Section § 17308
This law allows any state or local government agency in California that can invest its treasury funds in securities, which are typically safe enough for savings banks, to also invest those funds in notes issued by the state.
Any state or local agency that is authorized to invest funds in its treasury in securities which are legal investments for savings banks may invest the funds in notes of the state issued under this part.
state agency investments local agency investments treasury funds legal investments savings banks securities state-issued notes fund investment government securities investment authorization safe investments public funds California government notes
Section § 17309
This section allows the California Treasurer to seek a legal opinion from lawyers other than the Attorney General to determine the validity of notes if it's believed that doing so will make the notes easier to sell. This can be done either before or after the sale of the notes.
Whenever the Treasurer deems that it will increase the salability of the notes to obtain, prior to or after sale, a legal opinion as to the validity of the notes from attorneys other than the Attorney General, the Treasurer may obtain a legal opinion elsewhere.
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Section § 17310
This section ensures that money from the General Fund is set aside to pay the interest and principal on certain government notes. The term 'unapplied money' refers to funds that haven't been assigned yet, and when payments on these notes are due, they have priority. However, some payments, either required by law or allowed by the terms of the note or agreement, must be made before these note payments.
(a)CA Government Code § 17310(a) Notwithstanding Section 13340, there is hereby appropriated from the General Fund any unapplied money, as defined in subdivision (a) of Section 17220, in any amounts necessary to pay the interest on, and the principal of, any notes issued pursuant to this part, as the interest on and the principal of the notes become due and payable.
(b)CA Government Code § 17310(b) When any payment on a note or any payment to the provider of a credit enhancement or liquidity facility for a note is due, that payment shall be made subject only to prior payment of the following:
(1)CA Government Code § 17310(b)(1) Payments required by law to be paid before the note or provider payment.
(2)CA Government Code § 17310(b)(2) Payments that by the terms of the note or credit enhancement or liquidity agreement are permitted to be paid before the note or provider payment.
General Fund appropriation unapplied money government notes interest payment principal payment credit enhancement liquidity facility payment priority Section 17220 due and payable note issuance financial obligations fund allocation
Section § 17311
This law section allows $250,000 from the state's General Fund to be set aside in a special account called the State Notes Expense Account. This money is used to pay expenses related to preparing, selling, and issuing notes (like financial instruments). The account works like a revolving fund, where costs are paid from it and then replenished when notes are sold. The expenses can also be covered by setting a higher interest rate on the notes, so the buyer pays a premium covering these costs.
Furthermore, any extra money earned as a premium from selling the notes can either pay these expenses or go back into the General Fund to help pay interest on the notes.
(a)CA Government Code § 17311(a) There is hereby appropriated from the General Fund without regard to fiscal years two hundred fifty thousand dollars ($250,000), which shall be set aside in a special account entitled State Notes Expense Account, and shall be used to pay expenses incurred by the Treasurer, Controller, or the Department of Finance in providing for the preparation, sale, issuance, advertising, legal services, or any other act which, in the discretion of the Treasurer or the Department of Finance, is necessary to carry out the purposes of this part. This account shall operate as a revolving fund and whenever notes are sold, out of the first money realized from their sale, any remaining expenses shall be paid and then there shall be redeposited in the account any amounts that have been expended for the above purposes, which amounts may be used for the same purposes and repaid in the same manner whenever additional sales are made. Without limiting Section 17300, a demand drawn under Section 17300 may include the expenses described in this subdivision. In the alternative, all or a portion of the expenses described in this subdivision may be paid by causing the notes to bear interest at a rate that results in payment by the purchaser of the notes of a premium sufficient to pay these expenses.
(b)CA Government Code § 17311(b) Any premium received upon the sale of an issuance of notes shall be applied to expenses described in subdivision (a) or shall be credited to the General Fund and applied to the payment of interest on notes.
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Section § 17313
This section is designed to align with certain California Supreme Court decisions to ensure its constitutionality. Specifically, it follows the guidelines set by the court cases Riley v. Johnson from 1933 and 1936, and Flournoy v. Priest from 1971.
It is the intent of the Legislature that this part shall, in all respects, fall within the procedures validated by, and meet the requirements for constitutionality set forth in, the California Supreme Court cases of Riley v. Johnson, (1933), 219 Cal. 513, Riley v. Johnson, (1936), 6 Cal. 2d 529, and Flournoy v. Priest, (1971), 5 Cal. 3d 350.
constitutionality procedures validation Riley v. Johnson 1933 Riley v. Johnson 1936 Flournoy v. Priest 1971 California Supreme Court legislative intent legal alignment court cases California procedures
